Studio 38, developers of KoA, has been mired in debt and unable to make loan payments or meet payroll. The state of Rhode Island, which has a $75 million loan guarantee with them, may be on the hook to cover the failing studio should it fold.

38 Studios's $1.125 million check to the state of Rhode Island has cleared, governor Lincoln Chafee announced during a press conference this afternoon, thus fulfilling the first required payment on the studio's loan from the Rhode Island Economic Development Corporation.

Rhode Island is changing its legislation on tax breaks, closing loopholes pertaining to state funds being used for motion-picture endeavors, Chafee said. The state's interest lies in protecting the taxpayers, balanced with keeping 38 Studios solvent, since "taxpayers have had a very generous deal for 38 studios," Chafee said.

"It's time for them to go out and get private capital funding," Chafee said. "That's the deal. It's a generous deal, but stick to it."

Rhode Island officials believe that the total of the $49 million loaned to 38 has been spent. Chafee said that until late April, meetings with 38 suggested that they would make their May payment. "I want to make sure we're doing everything possible to make sure 38 doesn't fail," Chafee said. "We're in deep." Everything possible except giving them more money."There's not going to be any money from the state. They're not coming here for easy money."

According to Chafee, "Basically, the access to private capital hasn't materialized."

38 Studios' next payment is a debt service payment due November 1 of $2.6 million, and Rhode Island officials believe the studio will have the capital to cover it.

38 Studios will then owe $12.6 million in full annual debt service in 2013, and "that's on their dime," officials said.

Chafee said he recognized the risk involved in starting a new gaming studio, but the state would have benefited greatly from the studio's "huge success" had it done well.

"I said from the beginning that it was a risky enterprise," Chafee said. Regarding how 38 Studios will function if it doesn't have the funds to pay its employees, Chafee reiterated, "Again, these are the ramifications of being in a risky business."

Chafee doesn't plan on taking a gamble of this nature again: "Never, never ever. Not under my watch," he said.

And 38 Studios kills any chance for a gaming studio to get Government funding ever again (at least in R.I.).

That DOES look nifty. If they don't skimp out and fall into MMO tropes, it might be awesome. Of course, they'll need to rethink the quest system, since KoA is pretty much just doing typical MMO-type quests anyway. But that combat with an MMO would be fun.

That DOES look nifty. If they don't skimp out and fall into MMO tropes, it might be awesome. Of course, they'll need to rethink the quest system, since KoA is pretty much just doing typical MMO-type quests anyway. But that combat with an MMO would be fun.

It is and it's called Tera. (except it becomes much more challenging)

Edited, May 18th 2012 11:42pm by Shojindo

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An old silent pond... A frog jumps into the pond, splash! Silence again.

And apparently in a damage control move, 38 released footage from Project Copernicus (the planned MMO set in the Amalur universe) today.

[youtube=m9nvnrP0j8U]

idiggory, King of Bards wrote:

That DOES look nifty. If they don't skimp out and fall into MMO tropes, it might be awesome. Of course, they'll need to rethink the quest system, since KoA is pretty much just doing typical MMO-type quests anyway. But that combat with an MMO would be fun.

Honestly, that video is pretty sad if they really do intend to release the game in a year. Flybys of 3, maybe 4 distinct areas and... nothing else.

Considering how many years they've supposedly been working on it...probably won't even live up to Vanguard standards, especially considering the other studio issues.

Just because the video only shows a few zones doesn't mean the game only has a few zones worthy of being shown off. If the video was actually a damage control move, which we have every reason to believe it was, then it was probably thrown together quite quickly. I'm sure they have had people working on the real debut trailer for quite a while, but it just wasn't ready to be pushed forward.

Zones are easy to show. Hard to do a flyby that captures a bad angle, if you've developed them properly. It's much harder to show off characters, because you need to control the rate at which you reveal information. Plus, they are much more likely to change over the course of an alpha/beta than a zone is, the gear in particular.

And combat DEFINITELY won't be shown in a cobbled-together video. MMO combat is a hard sell, because it's far more interesting while playing than when watching (primarily due to CDs between abilities).

for cripe's sake, reckoning was the character/combat demo dammit. does anyone think a game by the same company in the same universe which was billed as a sort of single player version is going to significantly differ from the mmo in those regards?

if they had shown that stuff, all the boourns would be crowing about how similar it is.

Something about the story doesn't really make sense to me, but admittedly I'm not very financially-minded.

Apparently the game sold 1.2 million copies. But it needed to sell a staggering 3 million copies to be considered profitable.

What gives? 1.2 mil is a great number for a new IP, and EA seems to consider the game to have been a success. Seems like somebody erred greatly during budgeting. How was this game so expensive? Where did all the money go?

As a silver lining, it's been nice watching developers from other studios reach out to the 38 guys via twitter to try to get them hired. #38jobs is the hashtag.

they started out with the mmo, then bought the other developer and moved their game into the mmo universe, then they packed up and moved the operations. that's a lot of switching gears and changing direction for a company with zero revenue.

They had two projects in development, one of which was retooled from a project BHG already had when in development. All the initial design stuff was covered for both projects due to Copernicus' development, from the history to the art style. That should have shaved a decent amount off the cost of the projects. The MMO was set to launch next year, and it looks good. The fact that EA was publishing only reduces their cost (though also reducing their profit--though they clearly judged it to be advantageous).

It might be that they weren't actually receiving royalties for the game, since EA was publisher, but actually had to sell 3 Million copies to get their full payment. PC games are also vastly more profitable for the company, because they don't need to pay royalties to the console maker. Problem is that those royalties are paid upon printing, not sale--every physical console copy means money paid to Sony and Microsoft, so unsold copies are an even worse loss.

What boggles my mind is the timing. Last year's final quarter was absurdly loaded with big name titles. I worry that they launched KoA at a poor time simply because they couldn't afford to really wait. Which honestly sucks, because if they had launched it in late April/early May, I think it would have done really well.

Not to mention Skyward Sword, Dues Ex, Portal 2, Dark Souls, Uncharted 3, and AC:R. They weren't close to the release, no, but it led to a pretty massive build-up of RPG titles in the last quarter of 2011. Pretty much everyone's to-play stack had gotten pretty scary, which made anything but a major release (like ME3, in particular), pretty uninteresting. Particularly since Skyrim alone could absorb hundreds of hours.

And we might as well mention Modern Warfare 3, for the part of the player-base that also likes shooters.

Ideally, the game would have launched one month ago, or one month from now (to avoid the D3 competition in the PC sector). A more aggressive ad campaign would have been nice, but they clearly didn't have the money for it.

"The Rich are there to take all of the money & pay none of the taxes, the middle class is there to do all the work and pay all the taxes, and the poor are there to scare the crap out of the middle class." -George Carlin

Yeah, I've heard this described as what happens when one of those MMORPG fan boys who says "Dude, I have the best idea for a game ever" actually has the millions of dollars to get started. Usually they just post to web forums asking for someone to create free art assets and does anyone know how to program...?

Yeah, I've heard this described as what happens when one of those MMORPG fan boys who says "Dude, I have the best idea for a game ever" actually has the millions of dollars to get started. Usually they just post to web forums asking for someone to create free art assets and does anyone know how to program...?

The thing is, it isn't a bad game. I think that they probably spent too much money bringing in all the top-level people they brought in. Supposedly their operating costs are around $4M/month. As for the state, they shouldn't have touched it unless Schilling could bring more investors in, IMO.

Prior to the layoffs, 38Studios had to make their May payment of $1.2M in order to qualify for some amount of tax credits. Apparently, a loophole was found where the tax credits did not have to be paid out if the company isn't registered in RI, and they're registered in DE. I think the layoffs came after they weren't going to be getting the ~$8.7M in credits. If they don't make a $12.5M payment next May, it's likely to fall on the taxpayers to cover it.

I just find it so odd, because KoA was a legit game. Also, you know, there's the ridiculous hypocrisy of a small-government, free market advocate accepting a $75M loan from the state to make a video game.

Apparently, if 38 Studios closes (which it seems like it has, really), Rhode Island is left with the bill and gets the KoA IP in return. They very well might try to auction that off to recoop some of their loss. If that includes the development done on Copernicus already, and if the game is attractive, someone else might be willing to purchase it at a vastly reduced cost.

They should sell it off for cheap, but get a return on the profit when the MMO launches. Also, the opening screen should list the State of Rhode Island and Providence Plantations as Executive Producer.

From the sound of it, RI guaranteed the loan but, to do so, they greatly expanded an economic development fund and offered $50-plus million in bonds to cover it. So you had not only the expansion of a government program but also the bond interest debt that had to be covered. And, of course, now the taxpayers being left with the bill for 38 Studios' failure. While it's not fruitful to point out the hypocrisy on Schilling's part, it is accurate.

I was reading that RI has a "moral obligation" to service 38's debt but not necessarily a legal requirement and they could conceivably just default on it. Coming from a state much larger than RI (well, I guess most of them are), it seems weird to me to hear this event as a make-or-break issue for the state government but I guess it really is a big deal.

What Joph said. Their ultimate loan was going to be $79M, but loopholes actually kept them from getting over $20M of it because the company was registered in DE, not MD. The loan didn't come from MD directly, but from a coalition (or something) created and funded specifically by the state of MD to encourage high-skill industries to move into the state. Or something. It was ultimately to create jobs, not to create a blockbuster game.

The governor was strongly against it, and has actually been a giant douche through all of this. He closed his speech the other day by trashing the "sexism and violence" in the KoA:R game. Thanks, a$$hole, for completely fueling the typical gaming stereotypes to fuel your own campaign agenda off the backs of the developers who were losing their jobs after putting out an extremely well-received game.

Not quite. The RIEDC is a quasi-public agency that operates with funds allocated by the state legislature, governed by a Board of Directors. State governor Lincoln Chafee is the current chairman of the board.

The RIEDC sold bonds to raise the money. 38 Studios received payments from the state in installments, for meeting certain milestones: successfully relocating their office by a certain date resulted in a $9.4 million payment, successfully hiring a staff of 80 resulted in another $17.2 million, and so on.

To date, 38 Studios has received slightly less than $50 million of the guaranteed funds.

I'm not finding the thing about the loopholes. No clue where I read that.

The governor was strongly against it, and has actually been a giant douche through all of this. He closed his speech the other day by trashing the "sexism and violence" in the KoA:R game. Thanks, a$$hole, for completely fueling the typical gaming stereotypes to fuel your own campaign agenda off the backs of the developers who were losing their jobs after putting out an extremely well-received game.

I'm not a fan of Chafee, but to be fair, he wasn't the governor when the deal was made; it was made by a governor who was on his way out of office, and then Chafee was stuck with it. Basically, the whole thing was FUBAR from the start. People saw it as "creating jobs" but it didn't really create many jobs for RI residents; it brought in peopel from out of state to work here. I know it brought in income tax revenue, but the whole thing that was plastered in all the stories was the number of jobs it was going to create. The worst part to me is that basically the state pursued Schilling, not the other way around. A loan of that size from the state shouldn't have been given out unless Schilling had some other investors.

I like some of Linc Chafee's political positions, but overall tend to dislike him. He's in damage control mode with this whole thing. I can't really blame him for detracting from the game itself and whatnot. He's got to distance himself from it as much as possible if he wants to run for re-election.

The million dollar + payment that went to Rhode Island was in assurance we would receive the tax credits of 8 million. We even had buyers lined up for the credits and the government was sitting there telling us “You give us the million, we give you the tax credits.”

We gave them the million. They did not give us the tax credits, which would’ve not only payed the employees, but saved the studio most likely as we had several publishing deals in the works. The government flat out lied to us (big surprise)

The governor was strongly against it, and has actually been a giant douche through all of this. He closed his speech the other day by trashing the "sexism and violence" in the KoA:R game. Thanks, a$$hole, for completely fueling the typical gaming stereotypes to fuel your own campaign agenda off the backs of the developers who were losing their jobs after putting out an extremely well-received game.

I'm not a fan of Chafee, but to be fair, he wasn't the governor when the deal was made; it was made by a governor who was on his way out of office, and then Chafee was stuck with it. Basically, the whole thing was FUBAR from the start. People saw it as "creating jobs" but it didn't really create many jobs for RI residents; it brought in peopel from out of state to work here. I know it brought in income tax revenue, but the whole thing that was plastered in all the stories was the number of jobs it was going to create. The worst part to me is that basically the state pursued Schilling, not the other way around. A loan of that size from the state shouldn't have been given out unless Schilling had some other investors.

I like some of Linc Chafee's political positions, but overall tend to dislike him. He's in damage control mode with this whole thing. I can't really blame him for detracting from the game itself and whatnot. He's got to distance himself from it as much as possible if he wants to run for re-election.

Edited, May 27th 2012 11:15am by Spoonless

I was only actually talking about his reinforcement of gaming industry stereotypes, not the economic issues. I should have clarified that. I'm not actually following the economic aspects of the story that closely, because I don't have sufficient background knowledge to do so without serious effort.

I don't really quite understand the concept of creating jobs, though, since the whole deal was organized to bring talent and industry into the state. I guess they figured they'd create jobs when they put down roots? That's going to take more time than 3-4 years, and it also suggests a serious lack of understanding in how the game design industry tends to operate. Since studios aren't widespread, talent comes to them from all over. They aren't going to recruit locally when they'll get better applicants from all over the country who are perfectly willing to relocate.

And ax, I really, really hope that isn't true. It would be pretty awful if it was, for everyone involved. Because the people of RI are the ones who ultimately have to foot the bill, and if the credits could have realistically extended the company's financial stability far enough to allow for some new deals or for Copernicus' release, things might have gone very differently.

Well like I said, it was done when Carcieri was on his way out. He was term-limited, and they pushed it through. I doubt they brought in any experts on the video game industry, to be honest, or they would have been more informed about what it's like. I'm kind of ****** that they ****** the company around with the tax credits. I know you want to avoid dumping more money into a sinking ship, but with the development status of the MMO and apparently publishing deals in the works, it's just bad for everyone all around.

I'm pretty sure them releasing parts of the loan are/were predicated on x number of jobs being maintained in RI. I truly think that the committee didn't do their due diligence and thought that they would be creating jobs for residents.

What's sad is that it sounds to me like the studio only really needed a management change. Part of the issue, of course, actually was the fact that they had such solid talent. That doesn't come cheaply. But had the management handled things properly, primarily where marketing and other such business decisions were concerned, I'm sure Reckoning could have easily sold 3M copies. I had never even heard of it before release, which was problem A. But afterwards, literally every gaming outlet was talking about it, and they were almost universally saying positive (or even glowing) things.

But a common thread throughout EVERY review was a comparison to Skyrim. Both were open world RPGs with a focus on personal character development. And every one of those reviewers, and a huge percentage of their readers, were still playing Skyrim. Even if they were saying KoA was better (which many actually were), fans were having plenty of fun with the first game--far too much to bother switching to a new one, particularly when they might be developing characters with dozens (or hundreds) of hours invested.

What bums me out is that I do have faith that Copernicus would have been a success. Judging by how much work went into KoA's combat system, and that Reckoning was essentially launched to seed interest in the MMO, I imagine they would have worked to reinvent some things. I guess making it something like a more Western-style TERA?

Console MMOs are a b*tch logistically, though. Particularly if you intend to allow players to play together across platforms, and I just can't see a major MMO being successful if they can't.

You just aren't going to get both Sony and Microsoft to agree to a contract that allows their players to access the same servers as the other. Remember, technically speaking, you've only licensed your gaming console from them (the bastiids).

Add in Microsoft Xbox Live shenanigans, which is why FFXIV wasn't going to be available on the 360.

Now we have balance issues to contend with. Need for peripherals for players to actually perform equally. Graphical limitations. Etc.

Console MMOs probably won't be common across platforms. FFXI is the only one I can think of that has players really interacting externally across both companies. Dust 514 will allow for interaction between PC and PS3 (though they don't have balance issues due to the fact that the game itself is only on the PS3).

And I just can't see an MMO surviving without all the players pooling.

wow, what a saga. Been eyeing up this game but the sticker price is pretty high. And I don't really have any time to play it.

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lolgaxe wrote:

When it comes to sitting around not doing anything for long periods of time, only being active for short windows, and marginal changes and sidegrades I'd say FFXI players were the perfect choice for politicians.

Fast forward a year. In March of 2010, 38 Studios may have signed their own death warrant by agreeing to a publishing deal with Electronic Arts for Project Mercury, although it may not have been obvious at the time. 38 Studios exchanges all future royalties for sales of the game for a $35 million advance from Electronic Arts. In other words, no matter how well Mercury sold, it would not be a revenue stream for the developer.

Edited, Jun 13th 2012 12:35pm by Shojindo

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An old silent pond... A frog jumps into the pond, splash! Silence again.

Can't remember if this was the original 38 Studios closure thread or not, but Epic Games just announced that they are closing the studio that was formed from the remains of Big Huge Games six months ago.